Opec+ rolls quotas to April, Saudi extends cut: Update

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Opec+ members have agreed to roll over their current production quotas for a month — albeit with another exception for Russia and Kazakhstan — and Saudi Arabia has opted to extend its voluntary 1mn b/d cut for April.

Russia and Kazakhstan have received special dispensation to increase production by a respective 130,000 b/d and 20,000 b/d in April. This is as a result of "continued seasonal consumption patterns," according to an Opec communique. In January, Opec+ decided to increase official collective crude production by 75,000 b/d in February and another 75,000 b/d in March, also split between Russia and Kazakhstan.

This puts Opec+ production quotas 6.9mn b/d below the October 2018 baseline in April, excluding the additional voluntary cut from Saudi Arabia, and compares with 7.05mn b/d this month.

Saudi Arabia's energy minister Prince Abdulaziz bin Salman said the country would "gradually" phase back in its 1mn b/d voluntary reduction. Saudi Arabia will decide how in due course, but he added that it would not be done in a single month.

"We're not in a hurry to bring it back. We're not fast, or furious, we're cautious." he said, adding that Saudi wants to tie it to something, which is "hopefully a disciplined compensation scheme".

"I don't talk about prices… I care about discipline. I care about inventory levels — once they are within the contours of 2015-19, that is comforting," Prince Abdulaziz said. The oil minister did not disclose Saudi Arabia's February production, but signalled that the country was abiding by its voluntary cut.

"We have a record that can never be questioned," he said.

Countries party to the production restraint deal that have previously overproduced now have until the end of July to compensate, although that deadline has been repeatedly pushed back. The Opec+ coalition achieved 103pc compliance with its collective crude production cut in January, up from 99pc in December.

"What is helping everybody is the realisation that we need to be careful and bring these volumes back gradually," Prince Abdulaziz said.

Saudi Arabia and Russia, the de facto heads of the Opec+ coalition, both urged caution and vigilance ahead of today's meeting. A delegate told Argus today that although there is a "brighter" demand picture and falling stocks, there are longer-term uncertainties relating to backwardation in Brent crude futures, with the possibility of production from the US, Libya and Iran returning.

"The right course of action now is to keep our powder dry, and to have contingencies in reserve to insure against any unforeseen outcomes," Prince Abdulaziz said ahead of the meeting.

The next Joint Ministerial Monitoring Committee (JMMC), which monitors compliance, will take place on 31 March. Opec+ will next convene on 1 April to discuss May's production quotas.

By Rowena Edwards, Nader Itayim and Ruxandra Iordache